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Esco Supports Patient Retention and Practice Revenue

Charles R. Stone, AuD

October 20, 2014

Interview with Charlie Stone, Esco

Carolyn Smaka:  Welcome, Charlie.  I wanted to cover an overview and some history on Esco.  What prompted you to start Esco?


Charlie Stone: The idea started back when I was in private practice, 23 years ago. I would tell my patients, just before their warranty ran out, “Here are your options.  You can do nothing, if you have a repair or a loss, and basically you’re on your own.  Or you can take advantage of extended coverage.”  Unfortunately, at the time there was only one company offering this extended coverage and their claims process was complicated and inefficient.  It caused the patient to be without their instruments for longer than necessary.  There was a ten step process that delayed the patient from getting their instrument repaired or replaced and created an undue hardship for the patient. This is how it worked in those days:

  1. When the patient had a claim, they would call this insurance agent
  2. The agent would mail them a form that the patient had to fill out and get notarized. 
  3. The patient then had to mail it back to the insurance agent for approval. 
  4. The insurance agent would approve it and then tell the patient to see their practitioner.   
  5. The patient would then make an appointment at my office for an ear mold impression.
  6. I would take the impression. 
  7. The patient would then mail it to the insurance agent. 
  8. The insurance agent would package it up and mail it to the manufacturer
  9. After the repairs were completed by the manufacturer, it was returned it to the insurance agent.
  10. The insurance agent would mail it to the patient and the patient would make an appointment with my office. 

This process would take a month at the least. See how long and convoluted this process is! I knew there had to be a better way to make this process more efficient and more productive with fewer complications.  So when I would call concerning a claim, I would make suggestions on how the process could be made easier. 

One day, I was fortunate enough to get the owner of the business on the phone and I may have caught him on a bad day as he said, “You know, Charlie!  If you think you can do it better, why don’t you do it yourself?”  I thought to myself, “Heck, why not? Maybe I should!” So, with the help of two friends in the insurance business, I did!  Esco became a reality and I am proud to say that we cut the steps in half and reduced the processing time to days rather than weeks.

Carolyn: How has your business impacted hearing aid warranties?  

Charlie:  Hearing aid warranties are even more attractively priced today.  Let me put this into perspective.  When we started Esco approximately 23 years ago, the policy cost was anywhere between $55 to $95. The hearing instrument itself sold for anywhere between $600 - $1000. So it was about 10 percent of the replacement cost to cover the instrument with a loss and accidental damage policy.

Today while hearing instruments cost almost $5,000 the price of the loss and damage coverage is $150 to $350, about 3 to 6 percent.  So hearing aid coverage is even less expensive today. It is in line with other consumer electronic devices.  If you go to Best Buy for an electronics purchase, they will sell you an extended warranty contract, for about 10% of the purchase price.  But it does not cover loss replacement.

One of the MarkeTrak studies from 2008 noted that consumers purchased new hearing aids roughly every 5 years. Since that data came out, hearing aids cost more. Consumers now feel that because they are paying so much more for the product, the life expectancy should be longer.  

The sales timeline of 5 years, the time for a person to buy a new set of instruments, is not diminishing. In fact it may be growing longer because of the versatility and programmability of the newer instruments and the fact that the price of hearing aids continues to raise. The consequence is a time gap between when the warranty expires and when the consumer purchases a new set of instruments.  Also, due to increased price competition, the practitioner can’t mark up the hearing device enough to make up for that lost revenue from the longer sales cycle. Therefore, it is necessary to come up with another source of revenue.  

The nature of the audiology market is changing.  Years ago, an audiologist’s main competition may have been the newest audiologist or dispenser in town, or the ENT practice down the street.  Now we have the big boys in the playing field, like Costco, United Health, and other online hearing aid sales groups as competitors. 

Since it is increasingly difficult to keep patients loyal to your practice, it is more crucial than ever to have some sort of a patient retention or patient loyalty program within your practice. Some of the products that Esco offers fill this bill very well.

Carolyn: You touched on patient retention and an alternative revenue stream. Could you expand on that?

Charlie:  We agree that the practitioner has to do everything they can to create that retention.  Traditionally, providing batteries for the life of the hearing aid has been one way to keep patients coming back, however, free batteries are not an incentive if the patient can buy a product cheaper somewhere else.

One very effective solution is an extended hearing instrument warranty, combined with a limited service plan covering office visits.  This enables a practitioner to not only capture some of the lost revenue because of the longer sales cycle, but also to strengthen patient loyalty.

Such a warranty can be offered on an annual renewable basis, and used as a reason for the annual office visit. That’s what Esco is here to provide. The extra reason. With an Esco policy, we will notify your patients two months before their warranty is about to expire and remind them to make an appointment to make sure everything is working properly.  The policy is tied to the practice, as it requires a certain level of service be provided as part of its provisions. In this situation the device is not tied to a specific manufacturer requiring that it be sent to only one place or that a patient has to be directly involved in the repair decision. The patient relies on you as the specialist, to decide where to send it for repair.

If the patient pays for additional coverage, it was my experience that they were motivated to keep their end of the warranty appointment.  That gives you opportunity to counsel them and determine whether they’re satisfied with their current products or whether newer technology may provide them with added benefit.

Carolyn: Can a person cancel a warranty because they want to buy new hearing aids?

Charlie: Definitely yes!  That’s the beauty of Esco! Your patient can cancel at any time during the year and receive a prorated refund.  At Esco, we offer a variety of products to suit the needs of the practice and how practitioners run their business. Our warranty-only product is very competitively priced compared to what the manufacturer offers. Unlike a manufacturer’s warranty, we’ll extend it out as long as you and /or your patients want.  Another nice feature is, we cover all instruments so you only need a single form to fill out.  And unlike a manufacturer’s warranty that excludes loss once a claim is made, we continue coverage. Most manufacturers extended warranties become considerably more expensive after four or five years so you think about purchasing new instruments. That is understandable but what if your patient is not ready to change products? Our products let your patient have their repairs and office visits covered for a reasonable cost.   They now have the freedom of choice.

Carolyn: What are the benefits of Extended Warranty?

Charlie :  If the price of an extended warranty is priced competitively below normal repair costs and includes value added office services like batteries, cleans and checks, electroacoustic analysis, otoscopic exams etc. etc. it just makes good sense to have this coverage.  The patient can have peace of mind protection a year at a time. To put it simply, you would pay Esco for only the warranty coverage and then you add your services cost to the warranty and sell that bundled to the patient. Hence minus the cost of the warranty anything you make on selling the policy is yours to keep.

In my office, as an added incentive, I would credit the patient up to $100 per year toward their next major purchase.   I would do this up to a total of 5 years or $500.  This applied credit combined with the ability of the patient to cancel anytime during the year helps shorten that sales cycle of 5 years, and keep a patient loyal to my practice.

I know that some professionals may think that once the warranty runs out at the end of two or three years, it’s time to sell the patient another set of hearing aids. In my opinion, this is shortsighted because patients are not necessarily thinking the same thing.   They made a big investment in hearing instruments and they are not expecting to turn around in a few years and do it again.

Consider again MarkeTrak data.  After the initial two or three year warranty expires, that patient is still going to have another two to three years before they even think about buying another set of hearing aids. What do you do during that timeframe to keep them loyal and to find additional revenue for your practice?  That’s where our products fit in.

Carolyn: Technology has advanced and products have become quite durable, so why the need for warranties?

Charlie: Think of it like this, would you much rather pay a fixed amount and budget every year accordingly or would you rather leave it unknown and suddenly have to deal with a massive bill you didn’t budget for? Products are definitely becoming more durable but they are still very far from being completely fool proof and not needing repairs. Why do you buy home insurance? You don’t anticipate a fire or break in, but you would like to be prepared and covered non-the-less. Patients similarly need coverage, especially for something as vital as their hearing aids. The coverage helps to keep the instruments working properly and to protect them against costly repairs and loss.  By using an extended warranty you can capture some of the lost revenue from the increased sales cycle, plus it will keep your patients coming back to you for service, increasing customer retention and reducing the risk of them going to your competitors.

Carolyn: What’s is included in a service contract?

Charlie:  You can include whatever you want.  Cleaning and checking the hearing aid, and possibly an annual hearing screening.  You can include electroacoustic analyses, video orthoscopic exams, suctioning and curating of the instruments.  You may cover replacement of the receiver guards and domes for RIC instruments.

The idea is your Esco contract locks the patient into your practice.  Using the hearing aid warranty as the insured portion and adding other benefits that will keep the patients coming back. You have created a hearing help supplemental plan that covers all the hearing aid needs which most third parties don’t cover.

Due to state and federal regulations, it’s important to use an underwritten product by a reputable company, such as Esco in order to protect yourself from insurance and warranty regulatory scrutiny.

Carolyn: What if you have a patient that has a set of instruments and they really like them?

Charlie: If they are happy or at least OK with the instruments they have, and all they want is to make sure that they’re covered, then they don’t want any surprises when it comes to repairs.  I’ve heard stories of patients being charged $450 to $550 for a single hearing aid repair. For patients on a fixed income, this amount of money may not be available.   That hearing aid may end up in a drawer, unrepaired. If a policy that covers repair and accidental damage were available at a reasonable amount, they would consider it without question.   

Loss replacement is what makes policies more expensive and the replacement cost of devices continues to rise.  Due to the rising replacement costs, Esco has a repair and accidental damages only policy without loss coverage at a greatly reduce price.  Our cost is about the same as what a manufacturer charges. No two patients are the same.  As a practitioner I always felt it was my obligation to give my patients all the available options so that they could make an informed decision. 

The ones that are happy or satisfied with their hearing aids may just want to be covered in case of an unexpected and expensive repair occurs.

Carolyn: Aren’t you letting revenue walk out the door?

Charlie: That’s exactly my point. Your patient may have other health issues or they maybe on a tight fixed income and just want to keep their hearing aids for as long as they can, without major unexpected repair charges. Don’t assume to know what’s right for your patient. That is something only they can do. Your job is to make sure they are aware of all of their options and let them choose what works and what doesn’t for their individual needs.

Carolyn: What’s the life of an Esco Policy?

Charlie: Most manufacturers’ policies will only extend to three years and possibly a couple will go out to four.  Our policies last as long as you and your patient choose.  We think it is the wrong strategy to force people to buy new instruments because they cannot receive coverage. 

Carolyn: What are common misconceptions about Esco?

Charlie: Some professionals may think their patients who lost their devices and receive replacements from the manufacturer can’t be covered elsewhere, or wouldn’t qualify, since manufacturers won’t sell them another loss policy.  That is not true with Esco.  Over a third of our new business right now is from people who have lost their hearing aid(s) and received a replacement from the original manufacturer. Since ESCO has the ability to separate the coverages, patients can get just a Loss & Damage  policy if they have remaining coverage under a warranty from the original manufacturer. ESCO will even prorate the policy if the patient only needs 8 months’ worth of coverage to coincide with any remaining original warranty expiration date.  In that manner any future policies will have coinciding ending dates. These are exactly the patients who may need loss coverage.     

Carolyn: As a parting thought, what advice would you give up and coming audiologists?

Charlie: My advice is something I have always told my daughter, as advice from a seasoned veteran, as she manages her practice.

  • Never assume you know the best course of action for your patient. Always give them the whole picture with all their options and let them decide what works best for them. You don’t know what their circumstances are or what factors are influencing their decision and don’t presume you do, because you don’t!
  • Always place your patient’s best interest before your own.
  • Don't be a choice, be the only choide for your patients by providing exceptional service.

Patient care and exceptional service is what will keep your patients coming back. Let me illustrate what I mean. Imagine you are in the market for a new TV. Normally when you buy a TV you keep it for at least 4 – 5 years before you decide that you might want a new one. When you are ready to make that purchase again you will probably go back to same place where you got your current TV if you received exceptional service the first time. This example may not be absolutely similar but you get the point. When your patients make a big investment they want it to last for a long time. The best way to guarantee that they come back to you again and not get swayed by your competitor’s messages is to form a positive relationship with them. Be honest, build trust, go above and beyond and over serve if necessary.  Providing your patients with exceptional service they won’t find anywhere else. Place yourself in their shoes, by asking yourself, would I do what I am asking my patient to do?

That is the best advice I have for up and coming audiologists. It is worked for me through the years I ran my practice and it is working for my daughter. Neither you nor your patients are always right, but treat your patients fairly and honestly and they will keep coming back.

Carolyn: Thank you, Charlie!  It's been great talking with you.

For more information, please visit or the Esco Expo Page on AudiologyOnline.

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charles r stone

Charles R. Stone, AuD

Founder and Executive Chairman, ESCO

Dr. Charles Stone is founder and Executive Chairman of ESCO.

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